GM announces shutdown of one plant in S. Korea

SEOUL, Feb. 13 (Aju News) -- General Motors announced its decision Tuesday to close one of its four plants in South Korea by the end of May, triggering concerns in the regional community that the Detroit-based carmaker may pull out unless it gets financial help.

GM has run four car assembly plants and one transmission factory since it acquired South Korea's troubled Daewoo Motor in 2002. It would close a plant for Cruze, a small sedan, and Orlando, a multi-purpose vehicle in the southwestern port city of Gunsan. The Gunsan plant is manned by some 2,000 workers.

GM Korea described the shutdown as inevitable for the restructuring of its overall business. "The performance of our operations in South Korea needs to be urgently addressed by GM Korea and its key stakeholders," GM Executive Vice President Barry Engle said in a statement.

"As we are at a critical juncture of needing to make product allocation decisions, the ongoing discussions must demonstrate significant progress by the end of February, when GM will make important decisions on next steps," Engle said.

The Seoul government expressed regret and called for GM's sincere negotiations with government officials and stakeholders, including the state-run Korea Development Bank (KDB) which owns a 17 percent stake in GM Korea. "We express our deep regret for GM's unilateral decision to shut down its Kunsan plant," the government said in a statement.

GM Korea, the third-largest carmaker in South Korea, has been hit by falling sales as well as rising costs and debt. Last year's sales fell 12 percent on-year to 524,547 units.

"Of course, when a foreign-invested company comes to Korea, it has to worry about the direction in which it can have a minimum profit structure," Trade, Industry and Energy Minister Paik Un-gyu said Monday in a parliamentary committee session.

GM has scaled down or shut down businesses in Russia, India and Indonesia. Last year, it sold its German unit Opel and U.K. brand Vauxhall to France's PSA Group for $2.3 billion. GM executives have complained about high costs and weak sales.

"This is a necessary but difficult first step in our efforts to restructure our operations in South Korea," GM Korea President Kaher Kazem said. South Korean legislators accused GM Korea of transmitting a large amount of money each year to its parent company and delivering vehicles at low prices for global sale by GM.

Hong Yong-pyo, a ruling party legislator, insisted the government should reject "excessive" demands from GM. "Our people will not allow the government to bear what they have lost," he said, attributing GM Korea's trouble to its debt estimated at 2.7 trillion won (2.49 billion US dollars), its interest burden, the global sourcing of parts, royalties for technology patents paid to its headquarters and high labor costs.